Question 1

What is a quality of earnings (QoE) analysis?

Accepted Answer

A quality of earnings analysis tests whether a company's reported profits reflect sustainable, recurring performance. We normalize EBITDA, strip out one-time and non-operating items, examine revenue and margin trends, and assess how earnings convert to cash. The goal is a clear, evidence-based view of what the business truly earns &mdash; the number buyers and sellers use to negotiate price and structure a deal with confidence.

Question 2

How is a QoE different from an audit?

Accepted Answer

A QoE is not an audit and provides no opinion on the financial statements. An audit looks backward to confirm statements are fairly presented under GAAP. A QoE is a deal-focused analysis: it normalizes earnings, tests trends, and highlights risks and adjustments that affect valuation and deal terms. QoE work is faster, tailored to a specific transaction, and built to inform negotiation rather than satisfy a reporting requirement.

Question 3

Should the buyer or the seller order diligence?

Accepted Answer

Both benefit. Buy-side diligence gives an acquirer independent validation of earnings and the leverage to sharpen valuation or renegotiate terms. Sell-side diligence lets an owner get ahead of buyer questions, control the narrative, and reduce the surprises that reprice or delay a deal. Many sellers now commission a sell-side QoE before going to market so the process runs faster and holds value through closing.

Question 4

What is a working-capital peg and why does it matter?

Accepted Answer

A working-capital peg is the target level of net working capital the business is expected to deliver at closing. It matters because the final purchase price is trued up against it &mdash; if delivered working capital falls short of the peg, the buyer is effectively owed the difference. We analyze historical working-capital trends to help set a defensible peg and identify net-debt items, so the closing mechanics reflect the real business and disputes are minimized.

Question 5

What is purchase-price allocation under ASC 805?

Accepted Answer

Purchase-price allocation is how a buyer assigns the total price paid to the individual assets acquired and liabilities assumed after a deal closes. Under ASC 805, the acquisition method requires recognizing identifiable assets and liabilities at fair value, with the remainder recorded as goodwill. We support this allocation and build the opening balance sheet so post-close financial reporting is accurate and audit-ready.

Question 6

Do you work with private equity and lower-middle-market deals?

Accepted Answer

Yes. We regularly serve lower-middle-market owners, private-equity-backed platforms, and strategic buyers. For sponsors running an active acquisition program, we provide fast, repeatable diligence on platform and add-on transactions. For owner-operators, we bring senior, hands-on attention to what is often a once-in-a-career sale. As a Top 200 U.S. CPA firm serving clients in all 50 states, we scale the work to fit the deal.

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Services: Transaction Advisory